BRRRR and Debt to Income Ratio

[Travers Xanthos]

Hi all!

I have a question about financing that I was hoping to get some guidance on.

I am currently working on a development project and once it is done, my debt to income ratio will be at about 40%. I would like to continue growing my real estate portfolio and am trying to find creative ways to continue leveraging.

I have an investor who has agreed to put up the money for some BRRRR projects and he has a very high annual income (over $1M a year) and only $5k a month in debt. I would find the deals, manage the rehab, and manage operations of the property and we would split the deals 50/50.

Is there a way that we could refinance the properties without them effecting my debt to income ratio?

Thanks in advance for the help!

[Andrew Postell]

@Travers Xanthos the main crux here that you SHOULD look better with rental property that you receive.  That is, if you are buying properties that cash flow....which I would assume you would be.  Now, I say "should" because that is if you are working with a lender that ALLOWS rental income to be used immediately.  When speaking with lenders I would recommend asking the questions below.  Not because each question would apply...but asking these questions might show you if they are flexible....or even know what we are talking about as investors.  Sometimes working with investors is a very rare occurrence with a lender.  So even though they say "yeah, we can do it"....it doesn't mean they are very good at it.  These questions will help you find out how good they are.  

Questions for Lenders

1. When do you start using rental income to help me qualify? (the answer needs to be immediately)
2. When do you start using “After Repair Value” on my property?
3. How long do you need me to be on title to refinance? (this is important if you do need a short term loan to purchase then refinance out - and the answer should be 1 day...very important that it is 1 day on title is all that is needed to refinance)
4. What is my minimum down payment required? (if they only require 15% down on a single family home that is usually a good sign that you are working with a flexible lender)
5. How many loans can I have with you?
6. Can I change title to my LLC?
7. Do you sell your mortgages?
8. What is your loan minimum?
9. Can you explain to me what your reserve requirements are?